Bank of America's policy on allowing third-party negotiators to work short sales
I am a third party negotiator that the agents and homeowners select to assist with the short sale process. For a year I have been negotiating with lenders through the Equator system, this past week I was told that I was not an agent or attorney and that I was not allowed to be working on the short sales. Has anyone else encountered this? Also how is Bank of America able to tell the homeowner whom they can have negotiate the short sale for them as long as I abide my our state laws (which I am). Most agents don't want to spend the extra time it takes to get a short sale approved and closed and that is why they come to me. I had 4 BofA short sales that have been being worked on for 3 months get denied and closed due to me not being an agent. I think that if the government investors were aware of this issue they would not be ok with it.
Replies to This Discussion
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Permalink Reply by Paul Francis - Vegas Short Sales on
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Yeah... well this is one of those things where the sellers should not be taking on an agent for their short sale that does not have the experience to begin with.
It's a pretty simple question that a seller should be asking:
"How Many Short Sales have you Personally Listed and Closed"?
When I started doing them on a consistent basis back in 2008, my Brokerage at that time required that it's agents sit through some in office training before being able to list short sales. No experience with them and you had to partner with an agent that did have experience until you at least learned the basics.
Today... there are agents running around listing short sales and then just turning the work over to the title companies .... and from my experience.... it's been horrendous.
For example... I was recently involved in a deal where the listing agent was relying on a title company to do the short sale. On top of that, during the transaction, I found out his full time job was being a fireman... (I called him for an update.... since no updates were ever provided) and the fire house alarm to go on a call went off. I have clients that are firemen so I knew what the noise was right away.
Long story short ... The part time agent had no experience, the title company has turned into a short sale mill .... and the property ended up being taken back by the bank before I even knew what was going on.
Good Job!
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Permalink Reply by Natalie Arndt on
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In our state unlicensed real estate assistants are not allowed to discuss anything pertaining to real estate. There is a huge liability when people who are not licensed and can be held liable for omissions are involved in real estate transaction.
The bottom line is that who ever you are working for is liable for anything that you do and if you are not licensed the person that is involved is taking a huge liability.
Banks are corporations who have attorneys on staff whose job is to minimize any potential legal issues and to comply with real estate laws as well as NAR rules and guidelines.
The fact that you are unlicensed and you have handled many of this files places who ever hired you under huge liability especially if any of these files get brought up in court for any reasons.
All of these rules are there in place to protect the public from unethical behavior of parties involved in transaction. The only way to insure that public interest is being safeguarded and protected is to have people who are licensed and who are following rules and guidelines of their real estate associations, NAR and following real estate laws.
The fact that you have been involved in real estate transaction without being licensed is frightening.
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Permalink Reply by Bud Carey on
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I have been able to handle this two ways...1. Hire an assitant that works for you B of A did allow me to work this way or 2. I have a negotiator who was licensed and no longer is, she is an independent contractor using a law firm as her agency. In other words her title is short sale negotiator for the law firm of ABC or Dooe Cheetum and Howe, The negotiator works from her home and visits the law firm once a week to meet up with the attorney for updates and to answer questions.
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Permalink Reply by Michael Teneyck on
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Kristin,
I can not speak to other states but in CA, you are required to be a licensed real estate agent or broker, or attorney. It is the Law. http://dre.ca.gov/pdf_docs/Article_ShortSales03_2010.pdf
Is a Real Estate License Required to Represent the Parties to a Short
Sale
The simple answer is YES, with some extremely narrow and limited exceptions and exemptions.
A real estate broker license (or a real estate salesperson license where that person is working under the supervision of his or her broker) is required under section 10131 (d) of the California Business and Professions Code (B&P Code) where a person, in a representative capacity on behalf of another, "negotiates loans…or performs services for borrowers or lenders …in connection with loans secured directly or collaterally by liens on real property…" for or in expectation of compensation, "regardless of the form or time of payment".
In addition, under section 10131 (a) of the B&P Code, a real estate broker license (or salesperson license with appropriate supervision by the broker of record) is required of any person who, as a representative of another, "Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange of real property…"
The exceptions and exemptions from the licensure requirement are few and narrowly drawn. For example, a California licensed lawyer is exempt when that person renders services in the course and scope of his or her practice as an attorney. Additionally, if a person is acting solely on behalf of himself or herself, or itself in the case of an entity, there is no need for a real estate license since the person or entity is not acting on behalf of another or others.
Because there is or may be mortgage loan "debt forgiveness" in a short sale, some people and entities argue that they can, and attempt to, consummate short sales on behalf of others without a real estate license by asserting that they are "debt negotiators", "debt resolution experts", "loss mitigation practitioners", "foreclosure rescue negotiators", "short sale processors", "short sale facilitators", "short sale coordinators", "short sale expeditors", or some other type of unlicensed short sale or debt specialist.
Yet it is because the loan debt is "secured directly or collaterally by liens on real property" that brings into play the legal mandate for a real estate broker license under California law.
If a real estate licensee wants to take a short sale listing and not conduct the short sale negotiations with the homeowner's lender, then the licensee must seek to ensure that an unlicensed third party is not performing the negotiations on behalf of the seller.
2
Criminal Penalties for Those Who Participate in Unlicensed Activities
. Those who engage in short sale transactions, including the related "negotiations", and who are unlicensed (and do not have the benefit of an exception/exemption), are in violation of California law. The penalties include fines and/or imprisonment under section 10139 of the B&P Code. ?
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Permalink Reply by Dana Harris Carter on
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Hi! I'm a Realtor who has specialized as a Preforeclosure/Bankruptcy/Fraud Specialist & Shortsale Negotiator for the past 15 years. The lenders do have the legal right to dictate who will represent the sellers in the shortsale negotiation process because they have a vested interest, of course, in the property. They will do whatever is necessary to protect that interest. To be frank when I read your story I was surprised, respectfully, that you were ever allowed by any lender to negotiate shortsales. It's been a long standing practice that lenders will not allow third party negotiators (especially if they are being paid for those services) unless they are a Realtor or an Attorney. As you are aware, we just receive our normal real estate commissions for all of the hard work that is done in these type scenarios. Every Realtor is not qualified nor do they desire to do so. A person has to have to have a serious passion and sincere desire that goes way beyond real estate and commisions. To be frank they want to ensure that fraud is not perpetrated and that a licensed professional is following the letter of the law. Believe me there are enough fraudulent Realtors & Attorneys, as it is. Therefore, I know that everyone is not practicing ethics. However, for the most part, overall the lenders feel that the majority of the above are implementing ethical and legal behavior. I have investigated a lot of real estate and mortgage fraud during my 15 year tenure which is why I know first hand about it. To be frank you may want to secure your Real Estate license for the sole purpose of working on Shortsales. Otherwise, they will put you out of business. I wish you the best in your endeavors!!!
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Permalink Reply by Michael Michetti on
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In Florida this is a major no, no. You would be considered engaging in the unauthorized practice of law and open yourself up to major liability.
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Permalink Reply by Kristin Johnsen on
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Exactly Smitty!
Everyone is this conversation holds real estate agents up on a pedestal and they are not more qualified than most to handle the seriousness of a short sale. That is why I decided to start doing what I do. I could not sit back and watch the agents that were failing at what they did. Their "real estate" training does not train them on how to negotiate short sales. I have been licensed before in California and no where in the testing process did it even mention short sales and it was in 2003 and there where short sales occuring then.
As for liability, I have disclosures that protect the sellers and myself, as do the agents when they list the property. I am not working with or for the agents, I am working for the seller. I have followed our state laws(no longer in California where they have a law for everything!) and have the proper insurance in the event that I fail to do my job correctly or something goes wrong with the transaction in the event of my negligence.
I state before that if a license was require for short sales, I would be the first in line to get it, but there isn't in this state.
As for the fee I charge, the fee comes from the lenders proceeds, if the lender wants to reduce it, then fine. It NEVER comes from the seller or out of the agents commission and I will NEVER make a deal fail because of my fee being reduced.
Kristin
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I don't know about the "holds real estate agents up on a pedestal" part.... what I see is everybody pulling up red flags or bad experiences with SOME 3rd party services (and some agents outsourcing their short sales) that probably have no business being in the short sale business to begin with.
The biggest hangups I have that I've come across when representing the buyer:
- Selling agents trying to pass on the 3rd party "short sale negotiation" aka outsource fee to the buyer.
- Passing all of the work off on to a 3rd party short sale mill such as a Title company.... and relying on the Title company to do everything.
As for the rest... well... we all have different state real estate laws to follow. Certainly not my business telling people what they can and can't do. I handle my own short sales... In the past, I've tried outsourcing a couple here and there but ended up doing all of the work anyways to get the deal done. My closing ratio on closing short sales is FAR HIGHER when I'm representing the seller then it is when I'm representing the buyer. Why? Who knows.. maybe I'm just lucky.
Personally.... I think the lenders could do a much better job streamlining the process to begin with to help clear out the housing mess sooner then dragging everything on for years and years.
It's really not that complicated for them to figure out if the incentives for them not to figure it out were taken away.
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Permalink Reply by Smitty on
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Again, Selling agents should not be in contract with 3rd party negotiators. SELLERS AKA HOMEOWNERS hire 3rd party agents and if a requirement to buy their home comes with a fee to pay their processor which should be fully disclosed to all parties, then I don't see this as any different than a selling lenderr requiring a buyer to utilize a particular mortgage company before they will review an offer. If you WANT to purchase that particular house, you abide by those terms. It's up to any BUYER if they want to go forward or not.
If your buyer agrees to pay $160,000 for a home and their total out of pocket to buy the home is the same, what difference is it for them to pay a negotiation fee out of that?
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Permalink Reply by Jeff Payne on
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Smitty, the reality is that the agents are the people that are hiring the third parties in most instances, at least that is what happens on the Gulf Coast of Florida and from conversations with other agents, happening in Arizona and I suspect Nevada too.
That is exactly the problem and the reason that Bank of America comes up with certain rules. I am sure the new rule came from instances in states rife with Short Sales and Foreclosures like FL, NV, CA and AZ.I agree that it is up to a buyer if they want to proceed with paying a negotiation fee but as their agent, I will advise them to keep looking for properties that don't have fees added to the buyers side for the benefit of the seller. We have one agent here that uses a 3rd party that indicates the buyer to "Pay 1.5% for clear title fee to XXXXXX" and the only deal I did with them, I advised the buyer on the contract to specify they will NOT pay the fee and we got it closed anyway because the rightful person, the listing agent paid it, as they should in my opinion
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Smitty, I will play devils advocate here..... If the SELLER hires the third party negotiator, why then would the buyer be required to pay for the negotiation fee?
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Hi Jeff, it's NO different than an REO seller requiring a buyer to go through a particular mortgage company. It's completely up to the buyer if they want to do that.
We also have the buyer pay for inspections, smoke certificates, Title V passing, etc., which are all usually part of the seller's costs. Again the buyer doesn't HAVE to buy the house if they don't like the terms of the contracts.
We can get paid 3 ways: 1) the seller 2) the lender 3) the buyer and to be honest the least amount of hassle is the buyers.
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